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An Entry Game with Learning and Market Competition

Chia-Hui Chen, Junichiro Ishida and Arijit Mukherjee

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: This paper provides a dynamic game of market entry to illustrate entry dynamics in an uncertain market environment. Our model features both private learning about the market condition and market competition, which give rise to the first-mover and second-mover advantages in a unified framework. We characterize symmetric Markov perfect equilibria and identify a necessary and sufficient condition for the first-mover advantage to dominate, which elucidates when and under what conditions a firm becomes a pioneer, an early follower or a late entrant. We also derive equilibrium payoff bounds to show that pioneering entry is generally payoff-enhancing, even though it is driven by preemption motives, and discuss efficiency properties of entry dynamics.

New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
Date: 2018-10
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1043

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